Randomly Noted

We haven’t heard much recently on the commercial real estate front other than some big workouts have been done for loans of some high profile deals before the financial crisis hit. Today, Fitch Ratings issued a report that makes it clear that while the commercial real estate market may have shown signs of improvement in some parts of the country, in others it remains a problem.

Fitch downgraded a series of mortgage passthrough securities today because of problems with some of the underlying loans. We know how hard hit the housing sector has been and how related companies suffered as well. But perhaps no town has suffered as much as High Point, NC.

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Over the past couple of weeks, Moody’s Investors Service has been downgrading more pools of commercial mortgage backed securities. And buried in releases of a couple of those downgrade notices comes word that a loan on famous New York City office building landmark has moved into special servicing.

The building is 666 Fifth Avenue and it was built in 1957 by Tishman Realty & Construction. It at one point had Citigroup as a major tenant, with a “Citi” logo replacing the numbers “666″ on the side of the building. Kushner Properties bought the building for nearly $1.8 billion near the top of the NYC real estate market in late 2006.

And now there appear to be some issues with that loan.

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Three major financial institutions reported earnings today (GE Capital, the finance unit of GE, along with Citigroup and Bank of America) and while all were profitable, one sore spot stuck out when you dug through the mounds of data each company reported: Commercial real estate remains a big drag.

GE Capital had net income of $830 million – and that was after it lost $524 million in its real estate portfolio. The unit said it wrote off $186 million of bad commercial real estate debt and had $1.6 billion of non-performing assets. It placed at $6.3 billion its unrealized real estate loss.

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GE Capital Finance Reserve Coverage

Commercial loans and commercial real estate continue to be the bogeyman for GE and its finance unit. The company reported a profit of $3 billion earlier today but its once money-minting finance unit contributed only $336 million to that profit. The drag remains real estate, which the company was a little slow to acknowledge last year was a looming problem.

It lost $593 million in the commercial real estate portion of its business in the most recent quarter versus a $60 million loss in the year-ago quarter. More importantly, it lost $1.5 billion for the year (a third of that in the last quarter) versus a gain of $1.1 billion for the prior year.

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